VENEZUELA

HYPERINFLATION
A Nation in Crisis

Presented by THE PIRATES (Group 3)

- Hend Essam Gaber
- Samah Saied Ahmed
- Heba Mohamed Abdelaal
- Mohamed Saied
- Ahmad Zakaria
- Kareem Adel Ibraheem
- Islam Sabry
- Sajed Osama Abd Elsattar
Contents
 Introduction.

 Economic History Before the crisis.

 Reasons of Crisis.

 Crisis Effect.

 The beneficiaries of the crisis

 To overcome the crisis.

 Conclusion.
 Venezuela

- LOCATION
-In northern South America that
borders the Caribbean Sea in north and
the North Atlantic Ocean in east.
-It has diverse natural attractions.
 Population
• Total Population 28,704,954 in 2021
• Why is the population decreasing?
-Economic and political instability. 

- Outflow in Latin America(6 million left , seeking food,

work, and a better life since 2014).
 History

-Independency
Simón Bolívar

• Gained independence in 1821, after a

lengthy revolutionary war fought under the
leadership
of Simón Bolívar.
• The Venezuelan bolívar is the official currency of
Venezuela 
 Economic Growth Period.
•  Economy of Venezuela is based primarily on petroleum.
• Venezuela first discovered oil in 1920.
• Previously, the country was an underdeveloped exporter of agricultural commodities
such as coffee and cocoa, but oil quickly came to dominate exports and government
revenues.
• Venezuela is the 8th largest member of OPEC and 26th in the world by oil production .
• Since the 1920s, Venezuela has been a rentier state, offering oil as its main export. 
• In 1973 Venezuela the country with the highest per-capita income in Latin America
• It was the best destination for outside workers specially (USA citizen )
RESOURCE CURSE
• Venezuela is considered a failed
petrostate
• Described by economics as Dutuch
disease
• Increase in development of a specific
sector (natural resources) and decline in
other sectors
• Venzeula ignored manufacturing sectors,
agricultre domestic industries
• Any falling in oil prices results in
contraction of Venezuela economy
Economic History

1920s to 1970s 1980 to 1990 1998

From 1920 to 1970:Oil is
discovered in Venezuela, which is
found to have the world’s largest
reserves. The nation’s economic
development is based on rising
prices and profits in oil exports.
1980s to 1990s: Global oil prices
fall. Venezuela’s economy contracts.
The country faces massive debt. .(oil
glut 1980s)(surplus of crude oil and
falling of demand )(falling of price of
barrel from 35 to 7 dollars)
Hugo Chavez, former leader of a
1992 coup attempt, is elected
president. He promises to use the
country’s oil wealth to improve
the lives of the poor.

Overreliance on oil prices and a Chavez expands social services,

In 1976:President Carlos Andres fractured political system without but corruption is rampant, and a
Perez nationalized the oil industry, parties agreeing on policies caused steady decline in oil production
creating state-owned Petroleos de many of the problems 1990s to reduces oil reserves and increases
Venezuela, S.A. (PDVSA) mid 90s government debt.

1976s to 1980s 1990s to mid 90s 2000s

Crisis before Maduro (Hugo Chavez)

The Venezuelan general strike ,

Global Energy crisis
also known as the oil strike or oil
lockout $20 billion dollars lost
during the oil lockout the
Venezuelan opposition to
President Hugo Chávez to force
a new presidential election.
Low production food supply and
control the price for 12 basic
food
End of Chaves Area with $40B
dept , and inflation 40.64%
huge levels of capital flight, with
private sector entities
transferring USD 8 billion
abroad.

2000 2001 2002 2003 2009 2010 2013

Chavez expands social services, Nationalized private company (oil

but corruption is rampant, and a
steady decline in oil production
reduces oil reserves and
increases government debt.
1. Land redistribution.
2. Low-income housing
programs
Currency devaluation
company) , Fix the Foreign
nationalizing more than 1,000
exchange rate. Chávez fired 19,000
companies during Chavez's 14
employees of PDVSA and replaced
years in office
them with employees loyal to his
government When oil prices were
high, Chávez funneled billions from
the oil industry into the country's
social programs. But he failed to
reinvest adequately in this capital-
intensive industry.
 Maduro 2013 (Era of Bad Management)

2013 2013 2013

Maduro Take control external Dept increase to Dakoza movement
be $132B Maduro Start to
Dept from outside away
from IMF

huge levels of capital flight,

with private sector entities Devalue of VEF to be
transferring USD 8 billion 6.30/USD , black market SITME (closing Market for
abroad. 27VEF/USD Trading )

2013 2013 2013

Between 2004–2013, oil revenue reached 700 billion US dollars, equivalent to 96 per cent of export income
for the country. This included 480 billion from the Fiscal Regime (taxes, royalties and special contributions )
 Maduro 2014 to 2020 (Era of Nation in crisis )
2014, oil price 2016, Cut 2019,
2015,
falls from $100 import to fall 2017, Donald President Juan
Venezuela 2020, Rosneft
to $71 due to from $66B in Trump country’s
parliament sanction
shale oil 2012 to $16.4B sanction , interim
election
production in 2016 president,

2019, U.S.
2014, shortage 2016, Annual
2016, Oil price 2018 , added PDVSA
in Basic supply Devaluation
had fallen to be Presential to the list of
due to high 10% price
$24 / barrel election sanctioned
inflation 56% rising to 242%
entities

the Russian energy company that carried out more than 70 percent of Venezuela’s oil sales, as well as two Mexican
companies that had signed oil-for-food deals with the country. The Trump administration announced that such
measures would continue if Maduro refused to give up power. Rosneft was also in charge of importing gasoline
into Venezuela at the time
Crisis Effect
 GDP
• Venezuela once boasted Latin America's richest economy - boosted by the biggest oil reserves on
the planet.
• But under former president Hugo Chávez, who died in 2013, and current President Maduro,
corruption, mismanagement and high levels of debt have seen the country's economy collapse.
• President Chávez took advantage of the oil boom in the 2000s to borrow heavily and government
spending soared.

• Then, during President Maduro's first term in office, the Venezuelan economy went into freefall.

• Many blame him and his socialist government for worsening the country's decline.

• President Maduro blames "imperialists" - the likes of the US and Europe - for waging "economic
war" against Venezuela and imposing sanctions on many members of his government.

• Plummeting oil prices in 2016 compounded the oil-dependant country's crisis.

 Crisis Effect on GDP (Real GDP growth) 
Oil output is on the decline
Production held virtually steady from 2002 - just before the national strike - to 2008, when global oil prices
peaked. Figures from the Organization of the Petroleum Exporting Countries (Opec) show the country earned
bout $60bn from oil that year.
But the collapse in oil prices towards the end of 2014 - a year after Mr Chávez died from cancer - decimated
the country's already-struggling oil-dependant economy.
Crisis Effect on GDP (Real GDP growth) 
Inflation
Title and Content Layout with Chart
The number of bolivars - the national currency - needed to buy
US$1 has also rocketed.
• The biggest problem facing Venezuelans in their day-to-day lives is
hyperinflation
• Venezuela entered hyperinflation at the end of 2017, preceded by several
years of large budget deficits and declining oil revenues. annual inflation
rates exceeded 2,000% in 2020.
• Venezuela entered hyperinflation at the end of 2017. Hyperinflation is
usually defined as a period when monthly inflation surpasses 50 percent
(corresponding to an annual rate of 12,875%)
• According to a study by the opposition-controlled National Assembly, the
annual inflation rate reached 1,300,000% in the 12 months to November
2018.
• By the end of last year, prices were doubling every 19 days on average.
This has left many Venezuelans struggling to afford basic items such as
food and toiletries.
 Employment
Unemployment has been increasing in the years of hyperinflation with the 2019 rate
seen as Venezuela's highest since the end of the Bosnian War in 1995 and the
biggest contraction since 2014 start of Libyan Civil War, according to the 
International Monetary Fund (IMF).

In January 2016, the unemployment rate was 18.1% and the economy was the
worst in the world according to the misery index. Venezuela has not reported official
unemployment figures since April 2016, when the rate was at 7.3%.

In October 2019, the unemployment rate reached 35%.

 By the end of the year, it was estimated that it would increase to 39% to 40%, and
that 60% of the economically active population belong to the informal sector, which
influences the low salary that has caused many young people to emigrate to other
countries
 Poverty

- Poverty in Venezuela is extremely high. 

- The child mortality rate has risen in Venezuela
- Child malnutrition is a huge problem
Poverty
 Monthly Minimum Salaries in Latin America

- As a result of this uncontrolled inflation, wages plummeted.

Wages in Venezuela are the lowest in the entire region and
among the lowest in the world currently—$6 per month.

- More shockingly, not only is this the minimum salary, it is

the country’s median wage. This means that half of the
workforce is earning less than $6 per month.
 Refugee and
migration

- In the four years of Venezuela’s crisis leading to the end of

2019, over 4.6 million Venezuelans fled the country. This is
about 16% of the population

- the largest migrant crisis in Latin America in over half a

century. This means that medical professionals such as
doctors and nurses are fleeing the country as well, causing
a shortage of medical professionals.

- As of December 2021, more than 6.05 million Venezuelans

had left their homes, with approximately 5 million of them
remaining in other countries in the Latin American and
Caribbean regions, primarily Colombia, Peru and Chile.
 Spread of Diseases

Venezuela’s health care system is failing.

Venezuelan hospitals are struggling to stay open as they face a severe shortage
in medicine  and other health care equipment.
Desperate Venezuelans must buy medicine off the black market in order to
survive, With COVID-19, the already-fragile health care system is buckling
under the weight of the outbreak. As of early March 2020, only 300 covid-19
tests were available for the entire country of 30 million people
The Beneficiaries of The Crisis

Plane fuel & Gold from Venezuela

Gasoline From Iran

Iran

Gold from Venezuela

Technical Expertise from Iran

Iranian Military invested in Retail

series
 Invested in Mining Gold, Diamond &
metals …

Russia
Invested in Oil Industry and export it
to China & India Using vessels
raising Malta or Grease Flags

Gold from Venezuela

US Dollars & Euro from Russia
To Overcome The Crisis
Venezuela's government should find a way to increase the value of their
currency to lower prices and increase exports at the same time. One of the
solutions that have already been attempted to reduce hyperinflation is
raising fuel prices and devaluing its currency, which hasn't worked.
 
The goal of a contractionary policy is to reduce money supply in the
economy by decreasing bond prices and increasing interest rates. In order
to increase interest rates, Venezuela's central bank will increase its prime
rate.
 
On the other hand, the other advantage of increasing interest rates is that
it will attract more of the wealthier investors of Venezuela and the foreign
 
- Venezuela was once one of the largest oil exporting nations in the world.
As the economy expands, consumers will be more willing to purchase oil
as more jobs have been created. This will create high demand which will
increase the prices of oil and benefit Venezuela's economy.
 
- If the contractionary monetary policy with the interest rates doesn't go
as planned, our next option would be to switch the Bolivar currency to the
U.S. dollar. This would be the optimal last option, and the benefits in doing
so will bring a much more stabilized economy.
 
- Venezuela can reduce the exposure to the black market as more jobs will
be created with better pay and a stronger healthcare system which can
help those suffering from the Zika virus. In case of a draught happening
again, the country will be prepared to meet these challenges with minimal
loss for Venezuelan economy.

- Political stability and solve all the issues with USA Government
 Conclusion
Inflation, poverty, unemployment, bad monetary policies were prevalent in
Venezuela. The initiative by Hugo Chavez to shift to a move to the planned
economy has shown more of a negative than positive impact on Venezuela. This
will ultimately lead to a brain drain as the educated Venezuelans are move to
other better off and stable countries.
 
Venezuela's crisis will be studied for many years to come as a case for
understanding the consequences of populism, democratic backsliding and the
un-ravelling of a rentier economy. Any efforts to bring about solutions to the
crisis need to take into account its diverse origins and ramifications.
 
Venezuela's crisis is a microcosm of wider dynamics, such as the rise of
authoritarian politics and the declining power of the United States. Possible
electoral and institutional solutions need to emerge in consonance with
productive arrangements that incen-tivize livelihoods and the environment.
Thank You